Question

Give four differences between cash basis and accrual basis of accounting?

Answer 1

Under the cash basis of accounting:
Revenues are reported on the income statement in the period in which the cash is received from customers. Expenses are reported on the income statement when the cash is paid out.

Under the accrual basis of accounting: Revenues are reported on the income statement when they are earned a which often occurs before the cash is received from the customers. Expenses are reported on the income statement in the period when they occur or when they expired which is often in a period different from when the payment is made.

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